Plantronics 2008 Annual Report Download - page 48

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stock options, $5.3 million in proceeds from the sale of treasury stock and $1.8 million of excess tax benefits from stock-based
compensation, which was partially offset by dividend payments of $9.7 million and $1.5 million related to the repurchase of common
stock.
In fiscal 2007, net cash flows used for financing activities consisted of $22.0 million related to the repayment of the line of credit
which was fully repaid in the fourth quarter of fiscal 2007, $4.0 million related to the repurchase of common stock and dividend
payments of $9.5 million. This was partially offset by $4.9 million in proceeds from the sale of treasury stock, $3.3 million in
proceeds from the exercise of employee stock options and $1.2 million of excess tax benefits from stock-based compensation.
Net cash flows used for financing activities in fiscal 2006 consisted of $70.4 million related to the repurchase of common stock, $23.0
million related to the repayment of the line of credit, and dividend payments of $9.5 million. This was partially offset by $45.0
million in proceeds from the line of credit, $16.9 million in proceeds from the exercise of employee stock options and $4.3 million in
proceeds from the sale of treasury stock.
On April 29, 2008, we announced that our Board of Directors had declared a cash dividend of $0.05 per share of our common stock,
payable on June 10, 2008 to stockholders of record on May 9, 2008. We expect to continue our quarterly dividend of $0.05 per
common share. The actual declaration of future dividends, and the establishment of record and payment dates, is subject to final
determination by the Audit Committee of the Board of Directors of Plantronics each quarter after its review of our financial condition
and financial performance, as well as meeting conditions under our credit agreement.
Liquidity and Capital Resources
Our primary discretionary cash requirements historically have been for capital expenditures, including tooling for new products and
leasehold improvements for facilities expansion. In fiscal 2008, we completed the construction of the new industrial design wing at
our Santa Cruz, California headquarters building and spent $2.7 million on capital expenditures for this project compared to $2.8
million in the prior year. We have also spent $1.2 million in capital expenditures for the construction of a new data center at our Santa
Cruz, California headquarters which we began in the fourth quarter of fiscal 2008 and over $2.0 million for various IT projects
compared to $9.6 million spent in the prior year to improve our manufacturing facility in Tijuana, Mexico.
In fiscal 2009, we expect to spend $27.0 to $32.0 million in capital expenditures, primarily consisting of various IT projects, tooling
for new products, and completion of the new data center.
At March 31, 2008, we had working capital of $335.0 million, including $163.1 million of cash and cash equivalents, compared with
working capital of $258.4 million, including $103.4 million of cash, cash equivalents and short-term investments at March 31, 2007.
We hold a variety of auction rate securities (“ARS”), primarily comprised of interest bearing state sponsored student loan revenue
bonds guaranteed by the Department of Education. Historically, these ARS investments have provided liquidity via an auction process
that resets the applicable interest rate at predetermined calendar intervals, typically every 7 or 35 days. The recent uncertainties in the
credit markets have affected all of our holdings, and, as a consequence, these investments are not currently liquid. As a result, we will
not be able to access these funds until a future auction of these investments is successful, the underlying securities are redeemed by the
issuer, or a buyer is found outside of the auction process. Maturity dates for these ARS investments range from 2029 to 2039. All of
the ARS investments were investment grade quality and were in compliance with our investment policy at the time of acquisition. We
currently have the ability to hold these ARS investments until a recovery of the auction process or until maturity. We have classified
the entire ARS investment balance as long-term investments on our consolidated balance sheet as of March 31, 2008 because of our
inability to determine when our investments in ARS will settle.
Typically the fair value of ARS investments approximates par value due to the frequent resets through the auction process. While we
continue to earn interest on our ARS investments at the maximum contractual rate, these investments are not currently trading and
therefore do not currently have a readily determinable market value. Accordingly, the estimated fair value of ARS no longer
approximates par value.
We have used a discounted cash flow model to determine the estimated fair value of our investment in ARS as of March 31, 2008. The
assumptions used in preparing the discounted cash flow model include estimates for interest rates, timing and amount of cash flows
and expected holding periods of the ARS. Based on this assessment of fair value, as of March 31, 2008 we determined there was a
decline in the fair value of our ARS investments of $2.9 million, which was deemed temporary.
The valuation of our investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact its valuation
include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the
underlying assets, underlying collateral value, discount rates and ongoing strength and quality of market credit and liquidity.